The Emerging Brazilian I.T. Industry and its Time-Zone Proximity Advantage

The Emerging Brazilian I.T. Industry and its Time-Zone Proximity Advantage

Rafael Prikladnicki (Computer Science School, PUCRS, Partenon, Porto Alegre, Brazil) and Erran Carmel (Kogod School of Business, American University, Washington DC, USA)
Copyright: © 2014 |Pages: 13
DOI: 10.4018/jgim.2014010101
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Abstract

Brazil has been emerging as an offshore destination for offshore IT software and services. The country already had a strong domestic base of IT clients to global companies. One of the competitive factors is time zone location. Brazil has now positioned itself as easy for collaboration because of time zone overlap with its primary partners in North America and Europe. In this paper we examine whether time zone proximity is indeed an advantage for software development by conducting a country-level field study of the Brazilian IT industry using a cross section of firms. The results provide some support for the claims of proximity benefits. The Brazil-to-North dyads use moderate timeshifting that is perceived as comfortable and advantageous for both sides of these dyads. The voice coordination that the time overlap permits helps address coordination challenges and foster relationships. These and other practices relating to time zones are described in detail.
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1. Introduction: Brazil’S It Industry And Its Emergence As A Global Competitor

With its political stability, talent pool and reliable telecommunications infrastructure, Brazil has been emerging as a key offshore destination for IT software and services (KPMG, 2009). Brazil’s IT industry is already large, and the sector employs 1.7 million people, including programmers, systems analysts and managers. Brazil’s IT-BPO export market turned over US$ 2.4 billion in 2010 (including IT-BPO services captive centers and software).

Yet, paradoxically, Brazil is still a small global player in IT. India is the largest competitor in the “offshoring industry”, exporting at 20 times Brazil. A recent report shows that Brazil has the seventh largest domestic Information and Communication Technology (ICT) market in the world (Brasscom, 2011). The largest share of the ICT market is technology developed by the government and the business sector. Therefore, the country has a strong domestic base of IT clients and for this reason the vast majority of the Brazilian companies are focused on domestic clients and do not focus attention on export. But this is changing. Brazil is becoming a world player in the IT-BPO area. As stated in an A.T. Kearney report (A.T. Kearney, 2011), “Brazil-based IT companies such as Politec, Stefanini, CPM, and Ci&T are equal in size to many key international competitors and are successfully expanding their capabilities beyond Brazil”. In addition, data released by Gartner in 2010 shows Brazil as the most balanced IT market among the BRIC nations (Brazil, Russia, India and China), particularly because of the market size, the quality of resources, and the robustness and stability of the economic and political environments. The same survey ranked the Brazilian IT market as the 2nd largest among emerging nations - after China - and identified Brazil as the Latin American headquarter of globally competitive firms, responsible for the creation of innovative and sophisticated technology. The formation of Brasscom, the Brazilian Association of Information Technology and Communication Companies, confirms the strategic intent to play the offshoring game. The Brazilian IT industry has grown 43% since 2008 and Brasscom estimates that in 2020 Brazil will have a USD 200 billion IT industry and will export USD 20 billion (Brasscom, 2011).

Brazil is just beginning to emerge as a global IT competitor many years after India’s emergence. National competitiveness has long been of interest. Heeks et al (2009) presented the success factors for nations to successfully export IT services. Factors include the familiar, such as low wages; and the less intuitive, such as intellectual property regimes. Absent in this and early lists was location. Countries have historically competed or failed because of their location (Weber, 1929). But it is only recently that economic geographers have come to realize that there is a dimension of location that was previously overlooked: time zone (Stein, 2007).

The importance of time zones is also present in the IT industry. For example, according to Brasscom, Brazil’s value proposition is based on seven pillars (Brasscom, 2011). The first six are predictable: industry and business knowledge, qualified human resources, infrastructure, governmental support, favorable economic, political, and legal environment, cultural compatibility; but the seventh is time zone proximity.

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